UCLA economists bullish on the O.C., see stall in national economy

LOS ANGELES - With Orange County standing out as a particularly bright spot, California's coastal regions are showing signs of recovery while inland communities remain in the doldrums, mirroring a stall in the national economy, UCLA economists said today.

On the job front, California's unemployment rate will remain at 12 percent this year and average 11 percent through 2013, they said.

In their latest economic forecast, economists at UCLA's Anderson School of Management said their outlook for the nation was "far worse" than in June and that they expect the Gross Domestic Product to grow at just 0.9 percent on average for the five quarters ending in the first quarter of 2012.

In the view of the forecast's authors, the economy is growing so slowly that any modest shock could trigger a full-blown recession. "But there is no recession in the forecast yet," the forecast states.

"Simply put, the three sectors that would normally put the economy into recession are already depressed; those being housing, consumer durables and inventories," wrote Anderson Forecast Senior Economist David Shulman.

"Even if housing starts drop to new lows, this sector of the economy has shriveled so much that it would only have a modest impact on economic activity... If we are to have a new recession, it would have to come from a collapse in exports, a generalized decline in consumer spending with a resultant decline in business investment.

"All plausible, but we are not forecasting that eventuality," Shulman wrote.

Yet, "recession or not, the employment situation remains horrible. Job growth has stalled, and we forecast that the unemployment rate will soon rise to 9.5 percent," according to Shulman. "Thus, even by the end of 2013, we will not be back to the unemployment levels of late 2007."

California, meanwhile, is turning into a "bifurcated" state where "the coastal regions continue to grow out of the depths of the recession, while the inland regions suffer from economic doldrums," said a statement accompanying the forecast.

"Coastal California enjoys a recovery rooted in exports, innovation and knowledge communities while Inland California continues to suffer from a glut of housing and a contraction in government spending," it said.

The gap between the coast and the interior "has begun to widen and the specter of long-term economic stagnation in Inland California has reared a not very pretty head," wrote Anderson Forecast Senior Economist Jerry Nickelsburg.

Overall, the forecast saw slow economic growth in the Golden State until the end of 2012 and only anemic growth in employment -- 0.7 percent in 2012, 2.1 percent in 2013. The unemployment rate will hover around 12 percent for the rest of this year and average 11 percent through 2013, according to the forecasts authors.

One California region where employment is growing is Orange County, according to the Anderson Forecast.

"While the prospects for sustained growth of the general California economy have recently weakened, there is more good news coming out of Orange County...," wrote Mark Schniepp in a section of the forecast focussing on the county's prospects from 2012 to 2016.

The forecast said unemployment in Orange County has declined nearly a whole percentage point from a year ago; private sector jobs have grown 1.1 percent this year, creating 30,000 new jobs since April 2010; new home production has leaped 60 percent year-to-date; and tourism has rebounded.

Orange County's unemployment rate is projected to fall to 7.9 percent by 2013 compared to the projected California rate of 11 percent.

But not all news is good, according to the UCLA economists, who noted that despite signs of economic improvement, 72 percent of respondents in a recent Orange County survey believe conditions are deteriorating or never improved from the last recession.